After touching a 33-month high of 20,854.55, markets dipped into the red in early trades to touch a low of 20,657.51, down 197 points due to selling pressure in capital goods index while metal and IT continued to zoom ahead. The Sensex has pared losses and is currently trading higher by 11.6 points at 20,702 and the Nifty has risen 5 points to 6238.
Markets are taking a breather after the 485 points rally yesterday after US federal reserve announced the likelyhood of quantitiative easing two in the Novemeber meeting."The markets are not cheap at current levels, but flows are strong and are likely to continue in the run-up to quantitative easing expectations in November," Sandeep Nanda, CIO, Bharti AXA Life Insurance said.
Among the sectoral indices, IT and Tech, are up 1% each and continue to lead the pack closely followed by metal shares which have joined the wide spread rally in commodities. Gold has surged 0.58% to $1378/oz and crude has also risen 0.9% to $83.76/bbl on back of weakening green back. India Infoline in a Research note said weakness in the greenback is driving the rally across risky assets such as stocks and commodities.
However analysts expect rise in commodoties to not have much impact on India due to rising demand. "The weakness in the dollar due to expectation of quantitative easing is leading to an increase in the dollar denominated prices of commodities; while this could pose a challenge for India’s current account given our dependence primarily on oil imports, factors such as no underlying improvement in demand and enough liquidity mitigates this risk."
Capital Goods index has slipped into the negative, down over 1%; L&T down nearly 2%, Areva t&D and BHEL have shed around 0.8%.
The gainers in the Sensex stocks are Tata Stee and Wipro, up 2.4%, followed by Infosys and DLF which have added 1.6% and 1.3% each. The losers are L&T, followed by Reliance Communications and BHEL shedding down 0.8% followed by Cipla, NTPC, SBI down 0.5% each.
The market breadth is positive. 1434 stock have advanced while 1297 have declined.